Western tech corporations with vested interests in the media, entertainment and creative (MEC) sectors are having a tough time cracking the much-coveted Chinese market.
True, the country’s once accelerating economy is gradually slowing down. But with its colossal population of 1.3 billion-plus citizens, China is capable of providing a significant customer base to any exporter, even if the percentage share is tiny.
Yet, foreign international conglomerates like Apple Inc., Microsoft Corporation, Facebook Inc., plus a host of other companies offering consumer digital hardware and software, are struggling to surmount local cultural and commercial hurdles.
Apple’s sour experience
Apple is already seeing a decline in global sales of its iconic iPhones. This contributed to the 26% collapse in its revenues in the Greater China region during the second financial quarter, ending 26 March 2016.
Shortly after, regulator SARFT (the State Administration of Press, Publication, Radio, Film and Television) forced the company to shut down the local versions of its international online entertainment services, including iBooks Store and iTunes Movies. This is despite offering local content on both, and on streaming music platform Apple Music, which features recordings by Chinese artists like Li Ronghao, G.E.M and Eason Chan.
Then, to add insult to injury, Apple lost a crucial legal dispute over the trademark for the iPhone brand name. A Beijing court ruled that domestic consumer goods manufacturer Xintong Tiandi Technology owned the iPhone trademark for leather products made in the country.
Additionally, the iPhone brand is competing against fast-growing local smartphone manufacturers such as the much-admired start-up Xiaomi and legacy brand owner Huawei.
These two companies do not belong to the upstart Chinese copycats who have traditionally infringed the intellectual properties of Western brand owners and made their fortunes via piracy.
They belong to a generation of entrepreneurs inspired by the global success of Alibaba Group Holding, the Hangzhou-headquartered e-commerce colossus with significant investments in movies (Alibaba Pictures) and online video and TV (Youku Tudou). It is listed on the New York Stock Exchange.
Microsoft’s tough veneer
One US conglomerate that has formed legitimate partnerships with local companies to make inroads in China is software giant Microsoft. But it is yet another foreign corporation constantly struggling to get its Chinese businesses around state-imposed obstacles.
Microsoft has had offices in China since 1992. It has formed alliances with local tech giants like search engine company Baidu to introduce upgrades for its Windows operating system to Chinese consumers. And it has an agreement with the state-owned China Electronics Technology Group Corporation, which ensures government organizations use the new Windows 10 operating system too.
That, however, did not stop the authorities from carrying out extensive raids on its offices in 2014, following accusations of breaching anti-trust laws.
To read more about how Microsoft, Facebook, Apple, Amazon and other global tech giants are determined to snap up a piece of China, download TechMutiny Issue No.13